Workers Compensation Liens in Virginia Personal Injury, Car Accident, & Third Party Cases
How to Address Workers Compensation Issues and the Subrogation Lien When Negotiating a Personal Injury Settlement in Virginia
When an employee is injured in an accident while working that is caused by a third party’s negligence, that employee may have both a workers compensation claim against the employer and a personal injury case against the third party.
There are many situations where this can happen.
The most common example where an injured employee has both a workers comp claim and a PI claim is when the worker is driving as part of his job and is struck and injured by another driver in a motor vehicle accident. Another example involves the construction industry. If an electrician falls from a defective ladder he may file a workers comp claim. The injured electrician also has a personal injury claim based on negligence against the product manufacturer.
Virginia law relating to workers comp claims and personal injury claims arising out of the same work-related accident is complicated. This article discusses the interaction between workers comp and third party negligence claims. We explain how a Richmond personal injury attorney or Newport News injury lawyer can address workers comp issues when negotiating a personal injury settlement to maximize a client’s recovery.
Keep reading to learn more. Then contact attorney Corey Pollard for a free consultation: 804-251-1620 or 757-810-5614. We have helped hundreds of employees negotiate personal injury and workers compensation settlements in Virginia.
Understanding The Workers Compensation Subrogation Lien Against Personal Injury Proceeds
An employer and its workers compensation insurance company have a subrogation lien against the personal injury case. This means the employer and its carrier are entitled to repayment from the proceeds of the personal injury case for all benefits paid to the injured employee in the past and all benefits owed in the future.
Below are answers to common questions involving the workers compensation subrogation and indemnity lien against the proceeds of a personal injury action in Virginia.
What is the Basis of the Workers’ Compensation Lien Against Personal Injury Proceeds?
The workers compensation lien is based in statute.
Virginia Code Section 65.2-309 states:
A claim against an employer … for injury, occupational disease, or death benefits shall create a lien against any verdict or settlement arising from any right to recover damages which the injured employee, his personal representative or other person may have against any other party for such injury, occupational disease, or death, and such employer also shall be subrogated to any such right and may enforce, in his own name, or in the name of the injured employee or his personal representative, the legal liability of such other party.
What is Included in the Workers Compensation Subrogation Lien?
The workers comp carrier is entitled to reimbursement for charges for items that were “paid to or for the benefits of the injured worker.”
An injured employee and his or her attorney should always ask the workers comp carrier for an itemized breakdown explaining the lien. Often the lien contains items that are not reimbursable and should be removed from the lien. These items include charges for: independent medical examinations (IMEs); nurse case managers; and, attorney’s fees paid to defense counsel defending the work comp claim.
Is the Amount of My Workers Compensation Settlement Included in the Lien Against My Personal Injury Case?
Whether your employer and the workers comp insurer can include the amount paid in a lump sum settlement in the subrogation lien is an unsettled question.
In Spicer v. Robinson, Case No.: 16-99 (June 20, 2018) (Buckingham Cir. Ct) the court held that the workers compensation carrier’s lien did not include the lump sum voluntarily paid by the carrier to settle the claimant’s claim for future workers compensation benefits under the Act. This is a good ruling for injured workers.
The Supreme Court of Virginia, however, has not ruled on the issue of whether the workers comp lien against a personal injury case includes the value of a voluntary work comp settlement. There is a risk, therefore, that courts in other jurisdictions will decide that it does. Make sure you consider this risk when settling your claims.
Is the Amount of the Workers Compensation Lien Admissible to Prove Damages in My Personal Injury Case?
No.
The Virginia Workers Compensation Act states: “The amount of compensation paid by the employer or the amount of compensation to which the injured employee or his dependents are entitled shall not be admissible as evidence in any action brought to recover damages.”
You may, however, use the cost of past medical expenses and lost wages to build your personal injury case.
Does the Employer or Insurance Carrier Have to Do Anything Special to Perfect Its Lien Against the Personal Injury Case?
No.
The lien is created when an injured employee files a claim for workers compensation benefits.
Does the Employer or Insurance Carrier Have a Lien Against My Personal Injury Case if My Workers Comp Claim is Not Accepted or An Award is Not Entered?
Yes.
In Wood v. Caudle-Hyatt Inc., 18 Va. App., 391 (1994) the court held that a specific award of compensation from the Workers Compensation Commission is not necessary for the employer to have a lien against the personal injury case.
Does the Employer Have a Subrogation Lien if I Never File a Workers Compensation Claim?
Maybe.
Employers and workers comp insurers often make voluntary payments following a work injury. The payment of these benefits is not considered the filing of a claim of the entry of an award order.
Though there is not much case law on the issue, there is a possibility that the voluntary payment of benefits or giving of notice of an accident and injury to the employer may trigger the subrogation lien. Citing Stone v. George W. Helme Co, 184 Va. 1051, 1060 (1946) the court in Wood stated: “The employee necessarily prejudices his employer’s subrogation rights and, thus, is barred from obtaining or continuing to receive benefits under a workers’ compensation award when an employee settles a third-party tort claim without notice, or without making a claim for workers’ compensation benefits, or without obtaining the consent of the employer.”
Should I Notify the Workers Compensation Insurance Carrier that I Am Pursuing the Third Party Negligence Action in Circuit Court?
Yes. You should put the employer and insurance carrier on notice that you are pursuing the personal injury action.
If you fail to put the insurance carrier on notice then it may pursue the personal injury action on its own. This limits your input. And potentially it limits the amount you net for the injuries you suffered.
Can the Workers Comp Insurance Carrier File a Personal Injury Claim to Enforce Its Lien if I Don’t?
Yes.
The employer or its insurance carrier may enforce your right to damages for personal injuries in their own name. But it must obtain your permission and the permission of the Workers Compensation Case to settle the personal injury action.
If the workers comp insurer recovers more than the amount of its lien, you receive the remainder of the proceeds of the personal injury case – less your share of attorney fees and costs.
Obtaining The Workers Compensation Insurance Carrier’s Approval to Settle the Personal Injury Case
You should always obtain the workers compensation insurance carrier’s approval to settle the personal injury case. And you should get this permission in writing. There are no exceptions to this rule.
As stated by at least one court: “The employee necessarily prejudices his employer’s subrogation rights and, thus, is barred from obtaining or continuing to receive benefits under a workers’ compensation award when an employee settles a third-party tort claim … without obtaining the consent of the employer.”
Paying back the full amount of the workmans comp subrogation lien from the personal injury case proceeds does not affect an injured worker’s responsibility to obtain the consent of the employer and workers comp carrier to settle the personal injury case. This is because the workers compensation lien extends to benefits payable in the future.
What Happens if I Fail to Obtain Permission from the Work Comp Carrier to Settle the Personal Injury Case?
Failing to obtain the workers comp carrier’s permission before settling the personal injury case can harm your workers compensation case if it remains open and result in the permanent stoppage of benefits, including temporary total disability, lifetime medical, permanent partial disability, and permanent total disability benefits.
An injured worker forfeits the right to future workers comp benefits by settling without permission. This penalty’s severity depends on whether the injured worker continues to receive weekly wage loss payments, is still receiving medical care for injuries, or will require future care such as a spinal fusion or joint replacement surgery.
An injured worker also gives up the right to reimbursement of a pro rata share of attorney fees and costs if he or she fails to get permission to settle the personal injury case. This is significant because it deprives the injured worker of a tool that reduces the work comp carrier’s subrogation lien.
What if I Ask the Comp Carrier for Permission But it Refuses to Consent to the Personal Injury Settlement?
Sometimes the workmans comp insurance carrier refuses to act reasonably and cooperate with an injured worker’s attempt to settle a personal injury action. Fortunately an injured worker has a tool available to it: Virginia Code Section 8.01-424.1.
Under Virginia Code Section 8.01-424.1 an injured worker may petition the court where the third party case is pending for approval of the settlement. If the court finds that the settlement is fair then it will approve the settlement; however, the court may not reduce the subrogation lien.
Calculating the Value of the Workers Compensation Lien in Virginia
The best way to explain how a personal injury settlement affects workers comp benefits in Virginia is through an example.
Let’s say Big Ben is hurt in a car accident while delivering supplies from his office to a job site. He files a personal injury action and workers comp claim arising out of this accident.
Big Ben settles his personal injury action for $100,000. The workers compensation insurance carrier has a lien of $30,000. And Big Ben’s attorney takes a one-third contingency fee from the personal injury action and requests reimbursement of $3,000 in costs related to obtaining expert opinions.
Big Ben’s attorney fees and costs are $36,300, or 36.3 percent of the settlement. The workers comp insurance carrier, therefore, will have to reduce its lien by 36.3 percent. This means the workmans comp subrogation lien is reduced to $19,110.
What Happens to My Workers Comp Benefits After I Settle the Personal Injury Case with the Comp Carrier’s Permission?
We recommend trying to settle the workers comp claim either before or at the same time that you settle the personal injury claim. But this isn’t possible in every case.
If an injured employee is still receiving weekly workers compensation checks and medical benefits at the time the personal injury case settles, the workers compensation carrier often will file an application with the Workers Compensation Commission. This application will seek to suspend all benefits.
Following the filing of the application the Commission will enter an Order setting forth the “recovery ratio.” This is the rate at which the injured worker’s benefits are paid after a third party verdict or settlement. Though the actual calculation is case specific, the net effect is that the workmans comp carrier is entitled to a credit for any recovery in the third party case that exceeds the amount of the workers comp lien. In fact the injured employee may have to pay for ongoing medical expenses related to the work injuries, then submit the bills to the workmans comp carrier for reimbursement of a portion of the bills.
What Happens if I Refuse to Repay the Workmans Comp Subrogation Lien?
If you choose not to repay the workers comp lien then the workers comp insurer can sue you in civil court to recover the amount owed on the lien.
The right to bring this civil action is found in Virginia Code Section 65.2-311.
Negotiation Strategies to Reduce the Workers Compensation Lien
As a Virginia workers compensation lawyer and car accident attorney a big part of my job is trying to reduce the workers comp lien in third party cases. Below are just a few strategies to negotiate a reduction of the work comp lien:
1. If there is limited insurance coverage in the third party case and the injured worker would recover either nothing or very little in the third party case because of the workers comp lien, then threaten to drop the third party case unless the comp carrier reduces its lien. Do not do this unless you are willing to walk away. The insurance carrier will call your bluff.
2. Mediate the case with the third party insurance carrier and the workers comp carrier. Use the third party insurance carrier to team up on the comp carrier and convince it to reduce its lien.
3. Agree that the comp carrier is entitled to the full amount of its subrogation lien so long as it agrees to pay for medical treatment after the personal injury case settles. This benefits the injured worker in that he or she won’t have to pay medical bills out of pocket then wait to get a portion of those bills reimbursed by the comp carrier.
Your Virginia Attorney to Maximize the Total Net Recovery from Your Workers Comp and Personal Injury Claims
When you have a joint Virginia workers comp and personal injury case the goal is come up with a strategy that maximizes your total net recovery.
If you live, work, or were injured in Richmond, Roanoke, Charlottesville, Fairfax, Prince William County, Loudoun County, Fredericksburg, Norfolk, Virginia Beach, or Chesapeake, contact Corey Pollard for a free consultation. We help injured workers and accident victims obtain top dollar settlements.
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